The apparently limitless powers of the Official Assignee do not extend to 3rd parties

by Cameron Slater on December 18, 2015 at 4:00pm

At least not without the backing of a court. The NBR writes

The Official Assignee has a wide range of powers but not quite as wide as accounting firm Xero [NZX: XRO] has been suggesting.

NBR asked two lawyers about the rights and powers of the Official Assignee – both were speaking about the provisions of the Insolvency Act 2006 generally, and not about any specific case – and both have the same view.

Mike Whale, a lawyer at Lowndes Law and the editor with Justice Paul Heath of a book on insolvency, says the Official Assignee’s powers to request documents or to examine witnesses are indeed wide.

Mr Whale says it would be difficult to challenge any requirement to produce documents or be examined, unless it can be shown that the Official Assignee was exercising his or her powers unfairly, oppressively or vexatiously.

“The powers that the Official Assignee has been given in these circumstances are really designed to discover the truth of the circumstances connected with the affairs of a bankrupt, information about trading, dealings and so forth,” he says.

The Official Assignee can ask just about anybody just about anything, so long as it’s related to the property conduct or dealings of a bankrupt.

“There’s an obligation on virtually anyone to comply with the Official Assignee’s requests, if they have information or hold documents.”

However, that doesn’t give the Official Assignee free rein to go on fishing expeditions.

There has to be a direct cause for the OA to go for information. They can’t just, for example, request the password to a bank account of someone just to have a good look around.

But where a company, such as a bank, airline or Xero, holding information on a third party has been approached by the Official Assignee for that third party’s information, the Official Assignee has no power, without a court order, to compel that bank or other organisation to not tell their customer of the approach.

“I’m not aware of any power of the Official Assignee [to keep such an approach from a customer] without the assistance of the court,” Mr Whale says.

DLA Piper partner Iain Thain says lawyers would “recoil in horror” at the thought that companies holding information belonging to those who aren’t bankrupt, being prevented from telling their customers of any approach from the Official Assignee.

His view of the act tallies closely with that of Mr Whale.

“If the bank [or other organisation] was approached in that circumstance, the bank could still tell its customer that they had been asked to come along to the Official Assignee and be examined,” Mr Thain says.

“Really, the rationale behind that is it would then give the customer the opportunity to challenge the Official Assignee’s right to ask for the information that it’s seeking.”

As previously published in NBR, the specific case Xero is involved in is it providing information to the Official Assignee on the affairs of a company owned by Kristina Buxton, the wife of the bankrupt Dave Henderson.

In that case, not only did Xero hand over Ms Buxton’s information without telling her, it lied to her when she asked whether this had happened.

And that remains the issue where Whaleoil also would like a better answer than we’ve gotten to date. We’ve been told Xero is legally restricted from giving us these answers, but upon further investigation, we can’t find any gagging order on Xero.

Whaleoil was told that we would be informed once a certain court case had progressed to a certain point. It has, and we are still looking for answers to what appear to be very reasonable questions.

Why did Xero allow the Official Assignee access to accounting data without first informing the customer, thereby denying the customer the chance to object or seek an injunction? Why, once it was discovered it had happened and Xero were confronted with this situation, did they choose to tell the customer that they had not allowed the Official Assignee access, even when they had? Why is it that the answers to these questions are being withheld by claiming a gagging order is in place, when no such order has been able to be identified?

We’ve had Rod Drury here on a number of occasions expressing his frustration that this issue is being kept alive by Rodney Hide and also Whaleoil. Mr Drury has suggested Xero being targeted is unfair when compared to the amount of employment it provides and the general good it does. And he’s even struck out somewhat emotionally saying he would ensure Xero advertising would no longer be allowed to run on this blog.

What Mr Drury is still to do, and he has said he would once the alleged gagging order expired, is provide the answers to the simple questions above.

We all stuff up sometimes. Killing the messenger won’t work. Not when the messengers are Rodney Hide and Whaleoil. And this isn’t Xero bashing nor is it Mr Drury bashing. But when people refuse to allow sunlight to shine in dark corners, we become persistent and single minded, no matter how personal it may appear. Answer the questions, let the chips fall where they may, and then we move on.

– NBR

Disclosure: I and other Whaleoil Staff are Xero customers.

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As much at home writing editorials as being the subject of them, Cam has won awards, including the Canon Media Award for his work on the Len Brown/Bevan Chuang story. When he’s not creating the news, he tends to be in it, with protagonists using the courts, media and social media to deliver financial as well as death threats.

They say that news is something that someone, somewhere, wants kept quiet. Cam Slater doesn’t do quiet and, as a result, he is a polarising, controversial but highly effective journalist who takes no prisoners.